Memphis, Tenn. ( TheStreet) -- Severe winter storms cost FedEx (FDX) $125 million in its fiscal third quarter, causing the company to miss earnings estimates and to reduce guidance for the remainder of the fiscal year.
The overnight shipping company reported earnings of $378 million, or $1.23 a share, for the quarter ended Feb. 28. Analysts surveyed by Thomson Reuters had estimated $1.47. Revenue rose 3% to $11.3 billion. Analysts had estimated $11.4 billion.
FedEx said unusually severe winter storms disrupted operations, decreasing shipping volume and increasing costs. The impact on year-over-year operating income was pegged at $125 million.
"While severe winter weather often affects our third-quarter results, the impact from multiple severe storms and frigid temperatures was significantly more pronounced this year and we are reducing our full-year earnings per share guidance as a result of the weather impact," said Chief Financial Officer Alan Graf, in a prepared statement.CEO Fred Smith added, "On days when the weather was closer to normal seasonal conditions, our volumes were solid and service levels were high." In premarket trading on Wednesday, FedEx shares were down $2.37 to $136.20. Shares are down about 4% for the full year.
During the quarter, net income rose 5%. Operating income rose 9% to $641 million. Operating margin was 5.7%, up from 5.4%. Results included a negative net impact from fuel, partially offset by the benefit of one additional operating day. In the same quarter a year earlier, excluding items, FedEx earned $1.13 a share, or $1.23 including business realignment costs primarily including a voluntary buyout program. Looking ahead, FedEx projects earnings between $2.25 and $2.50 in the fiscal fourth quarter and between $6.55 and $6.80 for the full year. Analysts were estimating $2.33 for the quarter and $6.89 for the full year. The company reduced its spending forecast for fiscal 2014 to $3.8 billion, down $200 million from the previous forecast. "The $1.6 billion profit improvement plan at FedEx Express remains on track despite the near-term impact of weather," Graf said. "Our accelerated stock repurchase program initiated in January reflects our confidence in achieving our financial goals." During the quarter, FedEx Express revenue was down slightly to $6.67 billion, while operating income rose 14% to $135 million. FedEx Ground revenue rose 10% to $3.03 billion, while operating income rose 2% to $477 million. FedEx Freight revenue rose 9% to $1.35 billion, while operating income rose to $29 million from $4 million. Written by Ted Reed in Charlotte, N.C.
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